The Delhi High Court remarked that a reading of Section 60(5)(c) of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “IBC”) would show that the questions of law or fact to be decided by NCLT ought to be in respect of the proceedings which are pending before it and the questions must arise out or concerning the resolution or liquidation proceedings.
This, therefore, does not include the power to declare Regulation ultra vires. It was opined that NCLT is not equipped to decide on the validity and legality of the Regulations framed under IBC.
Brief Facts:
The Petitioner has filed the present petition against the order passed by NCLT vide which Regulation 36A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (hereinafter referred to as “Regulations”) was held to be ultra vires of Section 240(1) of the IBC.
Brief Background:
The proceedings before NCLT were initiated by Respondent No.1 where an application was filed to seek an extension for completion of the Corporate Insolvency Resolution Process (hereinafter referred to as “CIRP”). The NCLT observed that an expression of interest was floated but no resolution plans were filed. Thereafter, NCLT held that Regulation 36A is ultra vires of Section 240(1) of the IBC even though the Regulation directly was not challenged before it.
Contentions of the Petitioner:
It was contended by the Petitioner that NCLT had no power and jurisdiction to adjudicate on the legality and validity of the Regulations. It was submitted that the powers of the Petitioner can be traced back to Sections 196(1)(t) and 240 of the IBC.
Observations of the Court:
It was observed that the Petitioner is an authority that carries out diverse functions related to the implementation of IBC. The NCLT on the other hand is vested with the power of adjudicating any application or proceedings to decide questions of law or fact arising out of either insolvency resolution or liquidation proceedings.
The Bench remarked that a reading of Section 60(5)(c) of the IBC would show that the questions of law or fact to be decided by NCLT ought to be in respect of the proceedings which are pending before it and the questions must arise out or about the resolution or liquidation proceedings. This, therefore, does not include the power to declare Regulation ultra vires.
The High Court noted that the NCLT declared the Regulation ultra vires even when there was no challenge to the Regulation.
Further, it was opined that NCLT is not equipped to decide on the validity and legality of the Regulations framed under IBC.
The decision of the Court:
Therefore, based on the above-mentioned reasons, the order passed by the NCLT was set aside and accordingly the petition was disposed of.
Case Title: Insolvency and Bankruptcy Board of India v. State Bank of India & Ors.
Bench: Hon’ble Ms. Justice Pratibha M. Singh
Case No.: W.P. (C) 10189/2018
Advocate for Petitioner: Adv. Mr. Vikas Mehta
Advocate for Respondent: Advs. Mr. Akshit Kapur, Mr. Tushar Bagga
Read Judgement @LatestLaws.com
Picture Source :